A living trust is a written legal document that partially substitutes for a will. Your assets (your home, bank accounts, stocks, etc) are put into the trust, administered for your benefit during your lifetime, and then transferred to your beneficiaries when you pass.
The living trust described on this page is a revocable living trust, sometimes referred to as a revocable inter vivos trust or a grantor trust. Such a trust may be amended or revoked at any time by the person or persons who created it (commonly known as the trustor(s), grantor(s) or settlor(s)) as long as he, she, or they are still competent.
Your living trust agreement:
• Gives the trustee the legal right to manage and control the assets held in your trust.
• Instructs the trustee to manage the trust’s assets for your benefit during your lifetime.
• Names the beneficiaries (persons or charitable organizations) who are to receive your trust’s assets when you die.
• Gives guidance and certain powers and authority to the trustee to manage and distribute your trust’s assets.
The trustee is a fiduciary, which means he or she holds a position of confidence and is subject to strict responsibilities and very high standards. For example, the trustee cannot use your trust’s assets for his or her own personal use or benefit without your explicit permission.
A living trust can help ensure that your assets will be managed according to your wishes—even if you become unable to manage them yourself. In setting up your living trust, you may serve as its trustee initially, or you may choose someone else to do so. You can name a trustee to take over the trust’s management for your benefit if you ever become unable or unwilling to manage it yourself. And at your death, the trustee—similar to the executor of a will—would then gather your assets, pay any debts, claims and taxes, and distribute your assets according to your instructions. Unlike a will, however, this can all be done without court supervision or approval.
According to California attorney Daniel A. Higson, the greater the value of your assets (particularly if you own real estate), the greater the need for a living trust. Having a living trust could be important in the event of an accident or sudden illness. However, certain financial situations do not require establishing a living trust. Young married couples without significant assets and without children, who intend to leave their assets to each other when the first one of them dies, do not need a living trust and would not benefit from having a living trust. Other persons who do not have significant assets and have very simple estate plans also do not need a living trust. Finally, anyone who wants court supervision over the administration of his or her estate should not have a living trust.
If you are the trustee of your own living trust and you become incapacitated, your chosen successor trustee would manage the trust’s assets for you. If your assets were not in a living trust, however, someone else would have to manage them. How this would be accomplished might depend on whether your assets were separate or community property. If you are married or in a registered domestic partnership, assets acquired by either you or your spouse or domestic partner while together and while a resident of California are community property. (Note: In domestic partnerships, earned income is not treated as community property for income tax purposes.) On the other hand, property that you owned before your marriage or registration of your partnership, or that you received as a gift or inheritance during the marriage or partnership, would usually be your separate property.
In Ventura County, California, community property could be managed by your spouse or registered domestic partner if he or she is competent. If you own separate property (or are not married or in a registered domestic partnership) and you become incapacitated, such assets could be managed by an agent or attorney-in-fact under a power of attorney. Without planning, however, your separate property assets would be subject to a probate court proceeding called a conservatorship. During the conservatorship process, a judge could determine that you were unable to manage your own finances or to resist fraud or undue influence. The court would then appoint a conservator to manage your assets for you and report back to the court on a regular basis. Your conservator might be someone you previously nominated. Or, if no one had been nominated, it might be your spouse, registered domestic partner or another family member. If none of those persons are available, then it might be a public guardian. Conservatorship proceedings are designed to help protect you at a time when you are vulnerable or incapable of managing your assets. However, they are also public in nature and can be costly because of the substantial court intervention. In addition, conservatorship proceedings may be less flexible in managing real estate or other interests than a well-managed living trust.